Technologies of FDI firms in Vietnam far behind expectations

The Hanoitimes - The government should reconsider the technology transfer target of foreign direct investment (FDI) firms as the technology employed by the businesses isn’t as modern as expectation.

Tran Toan Thang, Head of the National Center for Socio-economic Information and Forecast’s world economics division, made the recommendation at a recent seminar on attracting and transferring technology in the FDI sector.

Technology has contributed modest to Vietnam's productivity growth since 2011.

According to Thang, technology has contributed modestly to Vietnam's productivity growth since 2011. The average technology employed by FDI firms remains outdated and is not much more modern than those in Vietnamese private firms, except in some FDI enterprises with strong finances.
Only 14% of FDI firms employ new technologies and machines aged less than five years, while most other FDI firms are using technologies aged ten years or more, Thang said, adding “there is no significant difference between the FDI sector and local firms in terms of technology.”
Furthermore, technologies from developed economies like the United State and other Western countries account for a small proportion of 6%, while many FDI enterprises use Chinese-made technologies, he said.Weak connectivity
Despite admitting FDI firms play an important role in attracting and transferring technology, participants at the seminar said that the efficiency of the transfer work between the FDI sector and the local sector has not met expectations.
Deputy Minister of Planning and Investment Nguyen The Phuong said after three decades of implementing policies to attract FDI, the foreign-invested sector has become a crucial part of the national economy.
In the first six months of 2018, Vietnam attracted 1,362 new FDI projects, 507 capital adjustment projects and 2,749 projects under the form of capital contribution, with total registered capital of over US$20 billion.
Foreign investment is an important additional source of capital, accounting for about 25 percent of the country’s total investment capital and contributing about 20 percent of GDP.
However, Phuong stressed that technology transfer as a key aim in attracting FDI has not been achieved.
“(We) should frankly admit that technology transfer between the FDI sector and the local sector has not been realized as expected,” Phuong said, adding that foreign-invested enterprises do not create a close linkage with Vietnamese ones which have yet to participate in the value chain.
Nguyen Thi Tue Anh, deputy director of the Central Institute for Economic Management (CIEM), said that FDI had a spillover effect on the economy, reflected through the positive impact on the productivity of the domestic sector.
“However, pervasive influence from FDI businesses’ technology transfer remains weak as few Vietnamese businesses gain access to their supply chains,” Anh said.
The government should also promulgate policies that support domestic enterprises to increase capacity and readily link, absorb technology and receive skills transfer, increase management capacity, human resources, as well as the capacity to sign and enforce long-term contracts, she said.
Do Hoai Nam, general director of the Department of Technology Appraisal, Examination and Assessment under the Ministry of Science and Technology, suggested speeding up the transfer of advanced technology from foreign countries to Vietnam, attaching special importance to the development of advanced technology on a large scale from foreign-invested enterprises to domestic enterprises, speeding up innovative operations of organizations and individuals.
Meanwhile, Nguyen Huu Xuyen from the National Institute for Patent and Technology Exploitation, stressed the necessity to soon complete a legal framework to make the National Technology Innovation Fund operate effectively.
The fund must operate as a financial organization and not hamper businesses’ approach to preferential credit for technology reception, transfer and innovation, he added.